Budget Implementation Act, 2016, No. 2 (S.C. 2016, c. 12)
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Assented to 2016-12-15
PART 1Amendments to the Income Tax Act and to Related Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
17 (1) The definition eligible capital property in section 54 of the Act is repealed.
(2) Paragraph (k) of the definition proceeds of disposition in section 54 of the Act is replaced by the following:
(k) any amount that would otherwise be proceeds of disposition of property of a taxpayer to the extent that the amount is deemed by subsection 84.1(1), 212.1(1.1) or 212.2(2) to be a dividend paid to the taxpayer; (produit de disposition)
(3) Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
(4) Subsection (2) applies in respect of dispositions that occur after March 21, 2016.
18 (1) The definition goodwill amount in subsection 56.4(1) of the Act is replaced by the following:
- goodwill amount
goodwill amount, of a taxpayer, is an amount the taxpayer has or may become entitled to receive that would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to the Income Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of a business carried on by the taxpayer through a permanent establishment located in Canada. (montant pour achalandage)
(2) Paragraph 56.4(3)(b) of the Act is replaced by the following:
(b) the amount would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.1 of Schedule II to the Income Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; or
(3) Paragraph 56.4(4)(b) of the Act is replaced by the following:
(b) if an election has been made under paragraph (3)(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of determining the cost of the property or for the purposes of subsection 13(35), as the case may be, and not to be an amount paid or payable for all other purposes of the Act; and
(4) Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
19 (1) Paragraph 69(5)(d) of the Act is replaced by the following:
(d) subsections 13(21.2), 18(15) and 40(3.4) and (3.6) do not apply in respect of any property disposed of on the winding-up.
(2) Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
20 (1) Subsection 70(3.1) of the Act is replaced by the following:
Marginal note:Exception
(3.1) For the purposes of this section, rights or things do not include an interest in a life insurance policy (other than an annuity contract of a taxpayer where the payment therefor was deductible in computing the taxpayer’s income because of paragraph 60(l) or was made in circumstances in which subsection 146(21) applied), land included in the inventory of a business, a Canadian resource property or a foreign resource property.
(2) Subsection 70(5.1) of the Act is replaced by the following:
Marginal note:Transfer or distribution — Class 14.1
(5.1) Notwithstanding subsection (6), if property included in Class 14.1 of Schedule II to the Income Tax Regulations of the taxpayer in respect of a business carried on by the taxpayer immediately before the taxpayer’s death that is a property to which subsection (5) would otherwise apply is, as a consequence of the death, transferred or distributed (otherwise than by way of a distribution of property by a trust that claimed a deduction under paragraph 20(1)(a) or (b) in respect of the property or in circumstances to which subsection 24(2) applies) to any person (in this subsection referred to as the beneficiary), the following rules apply:
(a) paragraphs (5)(a) and (b) do not apply in respect of the property;
(b) the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of the property and received proceeds of disposition equal to the lesser of the capital cost and the cost amount to the taxpayer of the property immediately before the death;
(c) the beneficiary is deemed to have acquired the property at the time of the death at a cost equal to those proceeds; and
(d) paragraph (5)(c) applies as if the references to “paragraph (a)” were read as references to “paragraph (5.1)(b)” and the reference to “paragraph (b)” were read as reference to “paragraph (5.1)(c)”.
(3) Subsection 70(6.2) of the Act is replaced by the following:
Marginal note:Election
(6.2) Subsection (5.1), (6) or (6.1) does not apply to any property of a deceased taxpayer in respect of which the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part (other than a return of income filed under subsection (2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) for the year in which the taxpayer died, to have subsection (5) or (5.4), as the case may be, apply.
(4) The portion of subsection 70(9.8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Leased farm or fishing property
(9.8) For the purposes of subsections (9) and 73(3) and paragraph (d) of the definition qualified farm or fishing property in subsection 110.6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a farming or fishing business carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a farming or fishing business in Canada, by
(5) Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
21 (1) Paragraph 73(3)(a) of the Act is replaced by the following:
(a) the property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer;
(2) Paragraph 73(3.1)(c) of the Act is repealed.
(3) Subsection 73(3.1) of the Act is amended by adding “and” at the end of paragraph (e) and by repealing paragraphs (f) and (g).
(4) Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
22 (1) Paragraph 79(4)(b) of the Act is replaced by the following:
(b) paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure at the time the property was acquired;
(2) Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
23 (1) Paragraph 80(2)(c) of the Act is replaced by the following:
(c) subsections (3) to (5) and (8) to (13) apply in numerical order to the forgiven amount in respect of a commercial obligation;
(2) Paragraph 80(2)(f) of the Act is repealed.
(3) Subsection 80(7) of the Act is repealed.
(4) The portion of subsection 80(9) of the Act before paragraph (a) is replaced by the following:
Marginal note:Reductions of adjusted cost bases of capital properties
(9) If a commercial obligation issued by a debtor is settled at any time and amounts have been designated under subsections (5) and (8) to the maximum extent permitted in respect of the settlement, subject to subsection (18)
(5) Subsection 80(10) of the Act is replaced by the following:
Marginal note:Reduction of adjusted cost bases of certain shares and debts
(10) If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties, owned by the debtor immediately after that time, that are shares of the capital stock of corporations of which the debtor is a specified shareholder at that time and debts issued by corporations of which the debtor is a specified shareholder at that time (other than shares of the capital stock of corporations related to the debtor at that time, debts issued by corporations related to the debtor at that time and excluded properties).
(6) The portion of subsection 80(11) of the Act before paragraph (a) is replaced by the following:
Marginal note:Reduction of adjusted cost bases of certain shares, debts and partnership interests
(11) If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of
(7) The portion of subsection 80(12) of the Act before paragraph (a) is replaced by the following:
Marginal note:Capital gain where current year capital loss
(12) If a commercial obligation issued by a debtor (other than a partnership) is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement,
(8) The portion of paragraph (a) of the description of D in subsection 80(13) of the Act before subparagraph (i) is replaced by the following:
(a) if the debtor has designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, the amount, if any, by which
(9) Paragraph 80(14.1)(c) of the Act is replaced by the following:
(c) amounts were designated under subsections (5), (8), (9) and (10) by each of those directed persons to the maximum extent permitted in respect of the settlement of each of those notional obligations; and
(10) Paragraph 80(15)(b) of the Act is replaced by the following:
(b) for the purpose of paragraph (a), the relevant limit in respect of the partnership obligation is the amount that would be included in computing the member’s income for the year as a consequence of the application of subsection (13) and section 96 to the settlement of the partnership obligation if the partnership had designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of each obligation settled in that fiscal period and if income arising from the application of subsection (13) were from a source of income separate from any other sources of partnership income; and
(11) Subsections (1) to (10) come into force or are deemed to have come into force on January 1, 2017.
24 (1) Paragraph 80.4(2)(e) of the Act is replaced by the following:
(e) the total of
(i) the amount of interest for the year paid on all such loans and debts (other than loans deemed to have been made under subsection 15(2.17)) not later than 30 days after the end of the year, and
(ii) the specified interest amounts, for the year, in respect of all such loans that are deemed to have been made under subsection 15(2.17).
(2) Subsection 80.4(7) of the Act is amended by adding the following in alphabetical order:
- specified interest amount
specified interest amount, for a year, in respect of a loan (referred to in this definition as the deemed loan) deemed to have been made under subsection 15(2.17) by an ultimate funder (as defined in subsection 15(2.192)), means the amount determined by the formula
A × (B/C)
where
- A
- is the amount of interest for the year paid not later than 30 days after the end of the year on all debts — owing by one or more funders (as defined in subsection 15(2.192), but excluding any funders that are ultimate funders as defined in subsection 15(2.192)) under one or more funding arrangements (as defined in subsection 15(2.192)) to the ultimate funder — that gave rise to the deemed loan;
- B
- is the average amount outstanding for the year in respect of the deemed loan; and
- C
- is the total of all amounts each of which is the average amount outstanding in the year as or on account of an amount owing under a debt described in A. (montant d’intérêts déterminé)
(3) Subsections (1) and (2) apply in respect of
(a) loans received and indebtedness incurred after March 21, 2016; and
(b) any portion of a particular loan received or indebtedness incurred before March 22, 2016 that remains outstanding on that day, as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on March 22, 2016 in the same manner and on the same terms as the particular loan or indebtedness.
25 (1) Subparagraph 84(1)(c.3)(i) of the Act is replaced by the following:
(i) on the issuance of shares of that class or shares of another class for which the shares of that class were substituted (other than an issuance to which section 51, 66.3, 84.1, 85, 85.1, 86 or 87 or subsection 192(4.1), 194(4.1) or 212.1(1.1) applied),
(2) Subsection (1) comes into force or is deemed to have come into force on March 22, 2016.
26 (1) Paragraphs 85(1)(d) to (d.12) of the Act are repealed.
(2) Paragraph 85(1)(e.1) of the Act is replaced by the following:
(e.1) where two or more properties, each of which is a property described in paragraph (e), are disposed of at the same time, paragraph (e) applies as if each property so disposed of had been separately disposed of in the order designated by the taxpayer before the time referred to in subsection (6) for the filing of an election in respect of those properties or, if the taxpayer does not so designate any such order, in the order designated by the Minister;
(3) The portion of paragraph 85(1)(e.3) of the Act before subparagraph (ii) is replaced by the following:
(e.3) where, under any of paragraphs (c.1) and (e), the amount that the taxpayer and the corporation have agreed on in their election in respect of the property (in this paragraph referred to as the elected amount) would be deemed to be an amount that is greater or less than the amount that would be deemed, subject to paragraph (c), to be the elected amount under paragraph (b), the elected amount is deemed to be the greater of
(i) the amount deemed by paragraph (c.1) or (e), as the case may be, to be the elected amount, and
(4) Paragraph 85(1.1)(e) of the Act is repealed.
(5) Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
27 (1) Paragraph 87(2)(f) of the Act is repealed.
(2) Paragraph 87(2)(g.3) of the Act is replaced by the following:
(g.3) for the purposes of applying subsections 13(21.2), 18(15) and 40(3.4) to any property that was disposed of by a predecessor corporation before the amalgamation, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(3) Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
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